Steady guidance can calm fears — and emotional reactions — around inflation and market volatility.
As a father of five, I often get to see firsthand how making impulsive decisions can feel like the right thing to do when emotions are involved. Fortunately, my children are learning the important lessons of emotionally charged decision making with low-stake issues and small sums of birthday money. That said, with inflation and market volatility persisting, it is easy to understand why grown-up emotions are running high as well. Consumers are feeling a push and pull as they make financial decisions, and they need steady guidance.
Having spent my entire career in the investment world — on the buy side, the sell side, in equity and debt, in public and private, institutional and retail — I’ve seen some tough economic cycles, each unique in its own way. What we’re experiencing today is being driven by persistently high inflation and the response from the Federal Reserve Bank to try to bring that inflation down by increasing interest rates to slow demand, which in turn impacts the markets. While the reasoning may not make us feel better, it’s important for consumers to remain focused on the long-term and ensure they have a financial strategy in place to help navigate times like these.
Two-thirds of consumers said inflation is their top personal financial concern in a recent study conducted by Lincoln. Not surprisingly, stock market volatility also has the attention of consumers, with 43% saying it is a concern1. However, despite more than 80% of consumers wanting to better understand how they can protect against inflation and market volatility, only about 1 in 5 have reviewed or made changes to investments or financial plans1. Life Insurance Awareness Month is an opportune time to adopt an “if not now, when?” financial planning mindset to address today’s challenges, including inflation and volatility.
Remember, market fluctuations are normal, so maintain a focus on the long-term goal. When we think about navigating market cycles from a personal finance perspective, a best practice is to build a thoughtful strategy and stay the course — while it can be difficult, buckle in for the long-term instead of reacting emotionally. The key to investing for long-term goals is time.
A strong investment strategy can counteract headwinds. Maintain a well-diversified investment portfolio. Diversification is our first line of defense against the risk that comes with investing in just one company or one sector. Make selections thoughtfully, being very careful not to take excess risk in any one sector or company.
Don’t just diversify your investment strategy, diversify your financial planning strategy. There’s no silver bullet asset to achieve all financial needs, so while a strong investment strategy is a key component, a well-rounded plan includes multiple tools. One that is often overlooked and misunderstood is Life Insurance. Permanent Life Insurance provides an opportunity to accumulate cash value. Some policies offer investment options that enable policy owners to pursue growth with market upsides while managing risk through downside protection. These funds can be used as a financial resource for needs such as covering a child’s college tuition, supplementing retirement income or unexpected events2. Consumers can also take advantage of optional features available for an additional charge to help protect against cost-of-living increases by automatically growing the policy’s coverage each year.
Execution of these tenets can help establish the foundation of a financial plan and a portfolio built to weather any economic cycle in support of both short and long-term goals.
About the Author: Jayson Bronchetti
Jayson Bronchetti is executive vice president, chief investment officer (CIO), head of Risk & Sustainability at Lincoln Financial Group and president of Lincoln Investment Advisors Corporation. He is a member of Lincoln Financial’s Senior Management Committee and serves as the primary investment officer to Lincoln’s board of directors and senior management team on all investment-related matters. He is responsible for the executive leadership, oversight and strategic direction of more than $300 billion in assets across both the general account portfolio and the separate account mutual fund complex. Bronchetti is also the chairman of the board of directors of the Lincoln Variable Insurance Product Trust family of over 100 mutual funds.
As enterprise CIO, Bronchetti leads a team of portfolio managers, research analysts, risk managers and client investment strategists. The team is focused on portfolio construction, asset allocation, due diligence of sub-advisors, and development of equity, fixed income and alternative investment strategies.
Bronchetti also oversees Lincoln Financial’s Chief Risk Office, which is responsible for enterprise risk management, operational risk management and the company’s $100 billion market risk hedging program.
In addition, Bronchetti is responsible for oversight of the company’s Chief Sustainability Office, and he is a director on the board of the Lincoln Financial Foundation, which is responsible for the company’s philanthropic efforts focused on financial wellness, youth education and human services.
Prior to Lincoln Financial, Bronchetti served as executive director of debt capital markets for J.P. Morgan. He has also held positions in private equity and fixed income asset management, trading, and investment banking with Macquarie Investments and Bank of America.
He currently serves on the board of directors of CITRS, Inc., a 501(c)(3) charitable organization focused on the advocation of character education and development. He co-founded the Chartered Alternative Investment Analyst (“CAIA”) Society of Philadelphia and has served as a board member on several private equity owned companies.
Bronchetti received his bachelor’s degree in finance, with a minor in economics, from Miami University in Oxford, Ohio. He is a graduate of the Executive Development Program at the Wharton School of the University of Pennsylvania. Bronchetti is a member of the CFA Society of Philadelphia, and holds his Series 7, Series 79 and Series 63 securities licenses.
1Lincoln Financial Group, Consumer Sentiment Tracker, 1Q-2Q 2022
2Withdrawals and loans will reduce the policy’s cash value and death benefit, may cause the policy to lapse and may have tax consequences.